The currencies of the world can be separated into several categories based on their role in the global economy, the economies on which they are based and their value versus other currencies. Understanding the different types of foreign currency can make global economics that much easier to follow.

Euro

The euro is the currency used across much of the European continent. It is unique in the world in that it is a single currency used across borders by different countries with different cultures and little if anything but a financial tie to hold them together. The euro is a strong currency that is valued highly and may challenge the U.S. dollar as the world's reserve currency in the future. As of 2012 the euro is used in 17 countries and plans are in place to expand it further depending on the state of both local and global economies.

Commodity Currencies

Some of the world's nations have economies that run on commodity exports. These countries are said to have commodity currencies because of the close relationship between the money and the amount and value of the country's exports. Commodities are nonspecific materials that markets around the world keep in high demand, such as grain, oil, iron or coal. These materials are not manufactured but produced or harvested. Some countries with such commodity currencies include Australia, New Zealand, Canada and Norway. As the commodities market goes, so goes the currency for the most part, although other factors come into play.

High and Low Yield Currencies

High-yield currencies are subject to high interest rates. Low-yield currencies are subject to a low rate. The principle is the same when it comes to currency as it is when discussing high- and low-yield investments of any type. On the global currency market, traders will take loans in a low-yield currency and use the money to buy a high-yield currency. They will hold the investment for a short time, then exchange the funds back into the low-yield currency and keep the change gained through interest.

Reserve Currencies

Reserve currencies are those used around the world in most business and financial transactions. They are chosen for their stability and reliable value and are kept in reserve by governments and central banks for use in trade and high-level transactions. The U.S. dollar has been the world's most powerful reserve currency since the Bretton Woods Treaty was signed in 1944. It is not the only reserve currency. Foreign currencies like the euro and the Australian dollar are also held in large quantities by many governments around the world and are used for about 40 percent of all governmental and business transactions as of October 2012.